BofA Earnings Beats Estimates, but Advisors’ Sales Slow

As bank sees plunge in profits from last year's Q3, the number of Merrill Lynch advisors drops by one from the previous quarter to 17,533

Bank of America headquarters, Charlotte, N.C. (Photo: AP) Bank of America headquarters, Charlotte, N.C. (Photo: AP)

Bank of America (BAC) said Wednesday that it had net income of $340 million, or $0.00 per share, in the third quarter, compared to $6.2 billion, or $0.56 per share, in the year-ago quarter. Analysts had expected BofA to report a loss of $0.07 per share.

It blamed the flat earnings on $1.9 billion of debit valuation adjustments (DVA) and fair value option (FVO) adjustments related to the improvement in the company's credit spreads, $1.6 billion for total litigation expense, including a charge for the previously announced settlement of the Merrill Lynch class action litigation, and a charge of $0.8 billion related to the repricing of certain deferred tax assets due to a reduction in the U.K. corporate tax rate. Together, these three items totaled a negative $0.28 per share.

The latest results benefited from improved credit quality across most major portfolios, increased sales and trading revenue (excluding the impact of DVA), higher mortgage banking income and increased investment banking income, the company says. However, average annual sales by financial advisors in the first nine months of 2012 are down 5.5% from the same period in 2011.

"We are doing more business with our customers and clients: Deposits are up; mortgage originations are up; we surpassed 11 million in mobile customers; small business lending is up 27% year over year; loans to our commercial clients rose for the seventh consecutive quarter; and our corporate clients made us the second-ranked global investment banking firm," said CEO Brian Moynihan, in a press release. "Our strategy is taking hold even as we work through a challenging economy and continue to clean up legacy issues."

Wealth Management

The number of financial advisors stood at 17,533 as of Sept. 30, which is down one from the second quarter but up 439 reps from a year ago. These figures include financial advisors in the mass-affluent Merrill Edge platform and others in BofA’s Consumer & Business Banking segment, which totaled 1,457 in Q3’12; 1,383 in Q2’12; and 1,032 in Q3’11.

The average yearly production (or fees and commissions) of Merrill Lynch advisors—excluding those in Consumer & Business Banking—was $910,000 for Q3, down from $921,000 a year ago and from $915,000 in Q2. On a nine-month basis, current annual production of $910,000 is off of the first nine months of 2011, when production averaged $963,000 per advisor.

Total client balances in Global Wealth and Investment Management rose 3% from the prior quarter to $2.3 trillion, led primarily by market gains, as well as gains in deposit balances, long-term assets under management (AUM) flows and loan balances.

Asset flows to advisors in the third quarter were $3.83 billion, down from $3.99 billion in the second quarter of 2012 but up sharply from $1.93 billion in the year-ago quarter. For the first nine months of 2012, new assets totaled $15.64 billion vs. $10.19 billion in the same period of 2011.

Total assets held in Merrill Lynch accounts were $1.86 trillion as of Sept. 30. This is up from $1.69 trillion a year ago and $1.8 trillion in the second quarter. The total Global Wealth unit had assets under management of $2.26 trillion.

Merrill Edge brokerage assets increased $13.9 billion from the year-ago quarter to $75.9 billion, driven by market improvement and asset growth from new accounts, the company said of its mass-affluent channel.

The company also increased the number of Financial Solutions advisors, mortgage loan officers and small business bankers during the quarter to approximately 5,800, some 3,200 of whom were deployed in banking centers.

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Check out where of BofA ranked in 12 Best & Worst Broker-Dealers: Q2 Earnings at AdvisorOne.

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